IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Haitong Securities Co Ltd (H) / Event-Driven

<ul>
<li>On 6 September, <a href="https://www.smartkarma.com/entities/guotai-junan-securities-co-ltd-5dfaf2c5-76d3-4f34-a77d-118787fd7091" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Junan Securities (2611 HK)</a> and <a href="https://www.smartkarma.com/entities/haitong-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5665:1" rel="noopener">Haitong Securities Co Ltd (H) (6837 HK)</a> entered a legally binding agreement to merge through absorption and share exchange. </li>
<li>The high-profile merger aligns with the Chinese government’s ambition to reform the brokerage sector and create world-class investment banks. The merger would result in the largest China broker by assets.</li>
<li>In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.</li>
</ul>


On 6 September, Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) entered a legally binding agreement to merge through absorption and share exchange. 
The high-profile merger aligns with the Chinese government’s ambition to reform the brokerage sector and create world-class investment banks. The merger would result in the largest China broker by assets.
In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.


Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a>'s FY24 result is distorted by non-recurring items and provisions. Adjusted net profit, however, has declined by only 4.3%, and is only 2.6% below consensus. </li>
<li>FY25 guidance looks positive as a 6% increase in dollar margin and a 5% increase in gas volume are expected. The Apr-May operating figures support such projections.</li>
<li>China Gas maintained its DPS despite a drop in reported profit, showcasing its confidence. Assuming the same dividend in FY25 and FY26, it will sit on a yield of 7%. </li>
</ul>



China Gas Holdings (384 HK)'s FY24 result is distorted by non-recurring items and provisions. Adjusted net profit, however, has declined by only 4.3%, and is only 2.6% below consensus. 
FY25 guidance looks positive as a 6% increase in dollar margin and a 5% increase in gas volume are expected. The Apr-May operating figures support such projections.
China Gas maintained its DPS despite a drop in reported profit, showcasing its confidence. Assuming the same dividend in FY25 and FY26, it will sit on a yield of 7%. 


China Gas Holdings (384 HK): Still Warrants a Look

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>CRG’s operating performance showed better recovery, with retailed /residential/industrial/commercial gas sales up by 10%/13%/10%/17% YoY in Aug.</li><li>In Jan-Aug 2023, the retailed gas sales growth recorded 7.1% YoY. For dollar margin, CRG achieved RMB0.58/cbm in Aug and RMB0.52-0.53/cbm in Jan-Aug.</li><li>We regard CRG can reach the target of gas sales growth of 8% YoY and a dollar margin of RMB0.5/cbm. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CRG’s operating performance showed better recovery, with retailed /residential/industrial/commercial gas sales up by 10%/13%/10%/17% YoY in Aug.In Jan-Aug 2023, the retailed gas sales growth recorded 7.1% YoY. For dollar margin, CRG achieved RMB0.58/cbm in Aug and RMB0.52-0.53/cbm in Jan-Aug.We regard CRG can reach the target of gas sales growth of 8% YoY and a dollar margin of RMB0.5/cbm. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CR Gas (1193 HK) – Sound Operating Data in Aug with Steady Growth Outlook

<ul>
<li>We think <a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> will see its operating momentum accelerate in 2H23, leading by better natural gas sales growth and sustained positive dollar margin performance.</li>
<li>It has strengthened its financial position in 1H23, with net cash amounting to 36% of market cap. This has demonstrated its cash-generating capability and controlled capex. </li>
<li>Its 7.0x and 6.6x PERs for FY23 and FY24 are inexpensive. Its annualised ROE of 10.6% is also attractive. There is room for the other businesses to recover in 2H23.</li>
</ul>


We think Kunlun Energy (135 HK) will see its operating momentum accelerate in 2H23, leading by better natural gas sales growth and sustained positive dollar margin performance.
It has strengthened its financial position in 1H23, with net cash amounting to 36% of market cap. This has demonstrated its cash-generating capability and controlled capex. 
Its 7.0x and 6.6x PERs for FY23 and FY24 are inexpensive. Its annualised ROE of 10.6% is also attractive. There is room for the other businesses to recover in 2H23.


Kunlun Energy (135 HK): The Story Is Still Going On

<ul><li>CR Gas’s 1H23 net profit rose by 16% YoY to HK$3,545mn, beating market expectation.</li><li>The strong earnings growth was mainly driven by gas sales volume growth of 6.9% YoY on the back of rebound of residential and commercial gas sales, which contributed 12.0%/6.9% volume growth respectively.</li><li>Looking ahead in 2H23E, CR Gas expects gas consumption to continue to recover gradually, with dollar margin of RMB0.5/cbm.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CR Gas’s 1H23 net profit rose by 16% YoY to HK$3,545mn, beating market expectation.The strong earnings growth was mainly driven by gas sales volume growth of 6.9% YoY on the back of rebound of residential and commercial gas sales, which contributed 12.0%/6.9% volume growth respectively.Looking ahead in 2H23E, CR Gas expects gas consumption to continue to recover gradually, with dollar margin of RMB0.5/cbm.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CR Gas (1193 HK) – 1H23 Results Marginally Beat

Hong Kong

China Resources Gas Group Ltd distributes natural gas and petroleum gas in the cities of Chengdu, Fuyang, Huaibei, Linhai, Suzhou and Wuxi in the PRC. The Company also operates compressed natural gas filling stations in Chengdu, Nanjing and Wuxi. The group also is involved in bottled liquefied petroleum gas distribution in cities of Fuyang, Suzhou and Wuxi.

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CR Gas (1193 HK)

Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)

In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.

Arun George

China Gas Holdings (384 HK): Still Warrants a Look

Adjusted FY24 profit shows slight decline, but FY25 guidance looks positive with expected increases in dollar margin and gas volume. Assuming same...

Osbert Tang, CFA

CR Gas (1193 HK) – Sound Operating Data in Aug with Steady Growth Outlook

CRG’s operating performance showed better recovery, with retailed /residential/industrial/commercial gas sales up by 10%/13%/10%/17% YoY in Aug.

CMB International

Kunlun Energy (135 HK): The Story Is Still Going On

Kunlun is expected to accelerate its operating momentum in 2H23, driven by increased natural gas sales and a positive dollar margin. Its strong...

Osbert Tang, CFA

CR Gas (1193 HK) – 1H23 Results Marginally Beat

Looking ahead in 2H23E, CR Gas expects gas consumption to continue to recover gradually, with dollar margin of RMB0.5/cbm.

CMB International

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52-week Range

Market Cap (USDm)

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Dividend (Yield)

Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)

In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.

Arun George

China Gas Holdings (384 HK): Still Warrants a Look

​Adjusted FY24 profit shows slight decline, but FY25 guidance looks positive with expected increases in dollar margin and gas volume. Assuming same...

Osbert Tang, CFA

CR Gas (1193 HK) – Sound Operating Data in Aug with Steady Growth Outlook

CRG’s operating performance showed better recovery, with retailed /residential/industrial/commercial gas sales up by 10%/13%/10%/17% YoY in Aug.

CMB International

Kunlun Energy (135 HK): The Story Is Still Going On

​Kunlun is expected to accelerate its operating momentum in 2H23, driven by increased natural gas sales and a positive dollar margin. Its strong...

Osbert Tang, CFA

CR Gas (1193 HK) – 1H23 Results Marginally Beat

Looking ahead in 2H23E, CR Gas expects gas consumption to continue to recover gradually, with dollar margin of RMB0.5/cbm.

CMB International

Adjusted FY24 profit shows slight decline, but FY25 guidance looks positive with expected increases in dollar margin and gas volume. Assuming same...

Kunlun is expected to accelerate its operating momentum in 2H23, driven by increased natural gas sales and a positive dollar margin. Its strong...